Online advertising: the impact of targeted advertising on advertisers, market access and consumer choice

The online advertising sector is growing at a significant rate in the past years, a trend that has been accelerated during the COVID-19 pandemic. While social interaction and attention increasingly takes place online, consumers and also SMEs as “end-users” become more exposed to online advertising. These advertisements are delivered by intermediary services, so called “Advertising Networks”, and are targeted to the individual user on the basis of their behaviour and personal data. This raises important questions about privacy, the potential of for exploitive discrimination and market power.

The existing legislative framework which applies to online advertising markets with all its relevant actors (e.g., P2B Regulation, ePrivacy Directive, GDPR, ...) will be complemented by new measures included in the proposals to the Digital Service Act and Digital Markets Act. The WIK study "Online advertising: the impact of targeted advertising on advertisers, market access and consumer choice" identifies opportunities and risks of targeted online advertising from the perspective of consumers and companies against the background of current legislation and develops possible approaches to address these from a regulatory perspective.

For this purpose, the online advertising market is analysed with regard to its different value creation stages and market participants. Technical characteristics of different targeting methods such as real-time bidding (RTB), the design of advertising auctions, the role of data, cookies and other tracking tools are explained and economic implications for consumers, advertisers, providers of advertising space and intermediaries are derived.

Based on a detailed literature review, an analysis of legal frameworks, as well as stakeholder interviews and country-specific case studies, the study develops clear recommendations. These include information obligations, design guidelines for obtaining advertising authorisation, transparency regulations with regard to algorithms, advertising auctions and the success of advertising campaigns. In addition, measures to prevent abusive behaviour by intermediaries (e.g. bundling) are suggested, which can be assigned a gatekeeper role in the sense of the DMA draft.

The study is available for download.

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